LONDON — It’s a promising form of electronic cash free from central bankers and beloved by
hackers. It — the Bitcoin — also might be in deep trouble, registering catastrophic losses that
have sent speculators scrambling.

Although the cybercurrency has existed for years as a kind of Internet oddity, a perfect storm
of developments have brought it to the cusp of mainstream use.

As currency crises in Europe piqued investors’ interest, a growing number of businesses
announced that they were accepting the cybercurrency for an ever-wider range of goods and services.
The value of a single Bitcoin began racing upward amid growing media attention, smashing past the
$100 mark last week before more than doubling again in just a few days.

Then came the crash. The price of a Bitcoin imploded, falling from $266 on Wednesday to roughly
$55 on Thursday. The best-known Bitcoin exchange, the Tokyo-based Mt. Gox, has suspended trading
for a 12-hour “market cooldown.”

Nicholas Colas, chief market strategist for the ConvergEx Group, said it was a “great question”
whether the currency could survive.

“At this point I would say yes, since it has before,” Colas wrote in an email. But he noted
that, unlike previous oscillations, Thursday’s collapse happened in the full glare of international
media attention.

“A lot more people know about Bitcoin than during the prior problems,” he said.

To its supporters, Bitcoin has enormous promise. They describe it as the foundation stone of a
Utopian economy: no borders, no change fees, no closing hours and no one to tell you what you can
and can’t do with your money.

Some of that promise is being delivered: When Bitcoin first got its start in 2009, the currency
could buy almost nothing. Now, there’s almost nothing that Bitcoins can’t buy.

Just days ago, the total value of Bitcoins in circulation hit $2 billion, up from a tiny
fraction of that last year. But late Wednesday, Bitcoin collapsed, shedding roughly 75 percent of
its value in a series of stop-and-start crashes that left many enthusiasts anxious and many
skeptics saying “I told you so.”

“Trading tulips in real time,” is how longtime UBS stockbroker Art Cashin described Bitcoin’s
vertiginous rise, comparing it with the now-unfathomable craze that saw 17th-century Dutch
speculators trade spectacular sums of money for a single flower bulb.

Colas seemed to reject the idea that the suspension of trading at Mt. Gox was a sign that
Bitcoin was coming apart at the seams.

“For the average user, losing Mt. Gox for 12 hours is like going to an ATM and finding that it
is out of money,” he said.

But he noted that the Bitcoin suffered from the same weakness of any other form of money. If
people increasingly believe it’s not worth anything, then it’s not worth anything — no matter how
clever the currency’s design is.

“The future of Bitcoin is, like all currencies, going to come down to trust,” he said.

One supporter with a unique perspective on the boom-turned-to-bust might be Mike Caldwell, a
35-year-old software engineer in suburban Utah. He mints physical versions of Bitcoins, cranking
out thousands of tokens with codes protected by tamper-proof holographic seals — a retro-futuristic
kind of prepaid cash.

He acknowledged that the Bitcoin might be in for a bumpy ride. But he drew the analogy between
the peer-to-peer currency enthusiasts who hope to shake the finance world in the next decade with
the generation of peer-to-peer movie-swappers who challenged the entertainment industry’s business
model in the 2000s.

“Movie pirates always win the long game against Hollywood,” he said. “Bitcoin works the same
way.”